Business

Media officials say they may face a recession

Representatives will wait in line at the Cannes Lions International Creative Festival in Cannes, France, June 2019

Cannes Lions

While media outlets are meeting with advertisers this week, while wearing the pink glasses at the Cannes International Creativity Festival, they can’t help but notice the disconnect between sailing with celebrities and the serious feeling surrounding the recession. corner.

“It feels like a party here,” NBC Universal’s Jeff Shell told CNBC’s Julia Boorstin, chief of staff, on Wednesday. “I don’t know if that’s because most of you are out for the first time in a long time or because we’re in the south of France in June, but no, it doesn’t feel like a lower market.”

But Shell admitted there were warning signs, albeit complicated. “The dispersal market has weakened slightly,” he said, referring to the real-time cost of TV commercials rather than the pre-established “forward” market. “It’s very complicated because a lot of things are happening.”

Macroeconomic downturns have historically led to an increase in layoffs across the media industry. As the odds of recession are rising and executives are preparing for a reduction in advertising revenue in the second half of the year, media companies are not firing people or firing staff, not yet. Instead, industry leaders believe that their business is ultimately bent and balanced enough to cope with an advertising downturn, without sacrificing profits or hiring businesses.

“Our focus has been on building a resilient and adaptable digital media company,” BuzzFeed CEO Jonah Peretti said earlier this month. “We are moving forward in the midst of volatility. We have built a light, diversified business model “.

Jonah Peretti, founder and CEO of Buzzfeed; Co-founder of the Huffington Post

Courtesy of Ebru Yildiz / NPR

“While the economic downturn may affect the media advertising market, we are on track to achieve our business growth goals after a milestone year of profitability,” said Roger Lynch, Conde Nast CEO. The company, which publishes The New Yorker and Vogue, made a profit last year after many years of losing money.

Part of what smaller digital media companies feel is ready for a recession is that they have already laid off hundreds of employees in recent years for their desire to get rid of purchases and costs. BuzzFeed announced more releases a few months ago.

However, many digital media companies make the most of their money – including Conde Nast and BuzzFeed. And not everyone is optimistic that media companies are out of the woods. BuzzFeed shares have fallen more than 80% since it went public. BuzzFeed earned $ 48.7 million in advertising revenue in the first quarter, accounting for about 53% of all sales.

If companies want to save money on marketing, there is little they can do to prevent it from being taken for granted, Graydon Carter, founder of the subscription-based Air Mail media company and a longtime former editor of Conde Nast’s Vanity Fair, said in an interview.

“If you’re in the business of programmatic advertising, which is the majority of digital media companies, you’re going to suffer at some point when the economy is booming. It’s out of your hands,” Carter said. “I think [a downturn] it will be wild and maybe long. “

Media releases in recessions

It’s natural for executives to feel optimistic about their company’s prospects. But the meaning of “this time will be different” is not without merit, said Alex Michael, head of Liontree Growth, which works with rising media companies. This is especially true for smaller digital media companies, including newspaper and magazine owners, who have diversified their subscriptions, e-commerce, events, and other products to eliminate advertising revenue.

“In the past, these businesses didn’t have their proper models and weren’t fully mature,” Michael said. “Now the waves of consolidation have passed. It has been completely facilitated and optimized. Many of the rest of the companies have endemic audiences that will open their wallets in different ways.”

How bad could that be?

Get the model right

The key to dealing with a recession is to have a product that resonates with a specific audience, said Michael from Liontree Growth. Digital media companies and magazines that have had too wide an opening have not been able to compete in economic downturns because the brands have not had a passionate user base.

“Advertisers have asked, what do you advocate for?” said Michael Strogoff. – What are they selling for?

There has also been a “riot” among buyers of ads willing to withdraw money from Facebook and Google for moral reasons, said Justin Smith, former Bloomberg Media CEO.

Smith is in the process of being implemented Semafor, a new global news media startup. In the digital advertising space that Google and Facebook have been using for more than a decade, there is a growing movement among advertisers who are diversifying their advertising spending to support the news industry outside of the tech giant in the face of Big Tech privacy violations and misinformation.

“First-time advertisers were really excluded from the media, especially with digital targeting, brand security. The news was closely linked to negativity, war, and famine,” Smith said. “Now you’re seeing the opposite: brand courage. The only real antidote to misinformation is human intervention. This is a pool of hundreds of billions of dollars. Even a small release from that group is big money.”

Smith is not worried about launching Semaphore into a potential recession. He said that while Semafor aims to attract university graduates from around the world to a wider audience than niche sites with a passionate audience, he said publications of general interest are also in a better place than they were 10 or 15 years ago. It credits the wide reception of the subscription.

“Especially if we look at the last five years, whether it’s been a pandemic, or a fascination with Trump, or the rise of Spotify and Netflix, it’s been a big change with the subscription,” Smith said. “There is an example of cross-category adoption for news subscription models.”

Smith set up a consumer wall for the Bloomberg News website three years ago. Today, more than 400,000 people pay for access. Semafor, which launches this fall, will begin as a free and ad-serving service and will remain so for “six, 12, maybe 18 months,” before installing a paywall. Some articles will always be free, Smith said, like many other digital news services.

Smith also said the industry has been transformed to better connect the public with journalists, even when they are at a standstill. Smith is promoting this enhanced link by providing talent agents directly, and journalists will be responsible for matching them to products and events outside of Semafor’s core business to broaden their reach.

“The media industry is in a better position than it was a decade ago,” Smith said. “Strategies are more sensible. Digital adoption is more ubiquitous. Models are clearer. Revenues are more diverse. Managers are more experienced. Although we are likely to face a global recession, I believe the media business will suffer. Downward pressure is stronger than in the past.”

Outreach: NBCUniversal is CNBC’s parent company.

SEE: Blake Chandlee TikTok ad chief speaks from Cannes



Media officials say they may face a recession

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